Is estate tax repeal a done deal?

Blog Post

Currently, there are three proposals being floated for tax reform:

  1. The House Republican leadership’s 35-page “Blueprint.” 
  2. President Donald Trump’s one page outline. 
  3. The nine-page “Big Six Framework” proposal that was released on Sept. 27, 2017.

All three proposals promise repeal of the estate tax, or the “death tax” as President Trump and the framework calls it. Interestingly, none of the proposals include repeal of the gift tax.

But now, the Wall Street Journal’s Richard Rubin has reported that certain Republicans may not be in favor of estate tax repeal. Why? Primarily because so few Americans are affected by it. The Tax Policy Center estimates that only 5,500 people will actually owe estate tax in 2017 and only 80 of them will be small businesses or farms. It has been the increase in the exemption that has reduced the effect of the tax. Only estates over $5.49 million are subject to estate tax in 2017 and the exemption will increase to $5.6 million per person in 2018. This means married couples would have to exceed $11 million dollars before estate tax would become an issue.

Due to budget reconciliation rules, any estate tax repeal law would likely not be permanent but subject to a sunset provision. In addition, proposed modifications of the step-up in basis rules and the failure to repeal the gift tax all make estate tax repeal very complicated.

So, although estate tax repeal may still be a part of the overall tax reform plan, we are still a long way away from declaring the “death tax” dead.

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